HIGH-TECH INCOME
How Formula 1 is transforming its image – and its income – through technology
Why a new breed of technology sponsors is entering F1
Over the past decade Formula 1 has been beset by negativity from within and without. It’s not too much of a stretch to say that it’s undergone an identity crisis brought on by changes in the wider world as it fights to retain and build its audience share.
Cost inflation ran rampant. The screaming V8 engines, such an important part of the draw for established fans, made F1 an obvious target for a growing movement which felt it was just a gas-guzzling waste of resources. Buffeted by economic slowdowns and the pressure to abandon fossil fuels, the formerly free-spending car manufacturers fled outright or grew disinclined to spend. Sponsors looked at F1’s declining TV audience and fogeyish dismissal of social media, sensed a commercial rights holder living in the past, and spent elsewhere.
There have been casualties, controversies and sacrifices along the way, but this picture is now changing for the better and the results are tangible. The cost cap is sweeping away F1’s money-pit image, making it investable once again. Embracing hybrids might have alienated those who prize noise but it has placed F1 at the forefront of technological innovation in this space – arguably seeing off Formula E, which is losing manufacturers at speed. And a more enlightened attitude to engagement via new media channels, including Netflix, is growing the audience.
Below the level of governance and commercial rights holder, a new generation of team leaders has accepted a fundamental truth their predecessors couldn’t: the era of the big-ticket title sponsor is over. Return on investment is more measureable and rate cards have had to evolve to suit this new commercial reality.
The net result of all the joined-up thinking is that F1 is attracting new sponsors, which is vitally important for its health. What’s been particularly noticeable in recent months has been the arrival of high-tech sponsors eager to exploit what marketing wonks delight in calling ‘synergies’. These companies not only want to build brand
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equity by plastering their logos on the cars and drivers, they also bring products and expertise which can benefit team operations.
Some of the names are relatively new, others are existing ones looking to re-establish their credentials in a changing landscape. To name just three of the recent arrivals, there’s Aston Martin title sponsor Cognizant, a 23-year-old IT, security services and tech consultancy company; Red Bull partner Oracle, one of the time-served big beasts of the software industry; and Teamviewer, which specialises in remote connectivity software, is now Mercedes’ third largest sponsor.
Mercedes boss Toto Wolff attributes this influx to wider changes which have made F1 more appealing, relevant and investable. The shift to hybrid powertrains is just one of the factors to provide this impetus, he reckons – another is the way data has become part of the story, packaged into the TV coverage along with a greater focus on explaining the effects of car development.
“I think foremost F1 stands for its historic values,” says Wolff. “The best man in the best machine wins. But it has switched from a gladiator sport somehow into fighter jets. Add to this the sustainability story that we can be really proud of because of the innovations that we bring to market in other industries.
“On the other side there is the case that the technology of high-tech companies can accelerate our own performance. It’s moved beyond the sticker on the car to a credible joint mission.”
Car manufacturer largesse cushioned the financial blow of cigarette sponsorship bans but teams have now had to adjust to the idea of operating a broad portfolio of smaller sponsors rather than relying on a handful of big-name big spenders. Sponsors were contributing product as well as hard cash long before Colin Chapman scandalised the world of motor racing by painting his Lotus 49s the red and gold of Player’s tobacco. Technological development has simply created more possibilities – that dreaded word ‘synergies’ again – beyond fuel ‘n’ lubes ‘n’ sparks.
Data is now a key battleground as resource restrictions have forced teams to accomplish more with less: fewer hours in the windtunnel, caps on Computational Fluid Dynamics research, and less time on track. Being able to use data to optimise on-track performance or generate racewinning strategic insights under time pressure is a massive sell for technology companies.
It’s no coincidence, therefore, that so many of these new sponsors have product to deploy as well as money to spend and an image to build. Cognizant is an unfamiliar name despite coming to market via an IPO in 1998. It’s eager to position its IT expertise as a fundamental element of Aston Martin’s rebirth narrative. Oracle is the second largest software company in the world, ubiquitous enough that you might think it doesn’t need the publicity, but it’s been around since 1977 and needs to establish leadership in new business lines. Its partnership with Red Bull gives its machine-learning project a global marketing presence as well as a test bed.
“Being good with data and analytics and machine learning is really a core competency of every Formula 1 team now,” says Oracle chief marketing officer Ariel Kelman. “You get this a great platform for promoting sophisticated technology use cases, to what’s already a massive fan base around the world that’s now becoming a very fast-growing sport in United States for a number of reasons, not the least of which is the Netflix phenomenon. You’re going to see more technology companies look at this as a real big part of their strategy.”
“Win on Sunday, sell on Monday” has long been the foundation of motor racing’s commercial appeal. But now more than ever that maxim doesn’t just apply to the car showroom.